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Mild Weather, Milder Diesel Prices

Warm weather keeps diesel prices low

Terrence Nguyen, web editor | Dec 08, 2004

The Energy Information Administration (EIA) said it expects diesel prices to hover around the $1.90-level through 2005. The recent dips in crude prices, which have pushed pump prices downward, are the result of unusually mild climatic conditions worldwide driving down energy demand.

“One of the factors that recently drove down diesel prices is extremely mild weather—not only here in the U.S. but in Europe and Japan—which also consumes a lot energy,” EIA economist Neil Gamson told Fleet Owner.

As a result, EIA has projected the average price for crude oil in the fourth quarter would be $49 per barrel. This reflects a $2-decrease from last month’s projection, yet is still $18 higher than the average crude oil prices in the fourth quarter 2003.

EIA expects strong global oil demand growth in 2005. That coupled with estimated historically low worldwide inventories, and OPEC hitting its production ceiling for the near-term will prevent a return of 2003 pump prices in the foreseeable future, the agency explained.

Recently The New York Times reported that the U.S. Strategic Petroleum Reserve was nearly filled. However, because the reserve would be tapped only in emergency situations, price impacts are largely blunted, Gamson said.

“But diesel consumption growth has been so strong that could mitigate some positive factors over the next year,” Gamson said. “Diesel growth is a function of economic growth, which means a lot of trucks continue to move goods across the country.”